Matt Nolan

What can a new lawnmower tell us about labour markets?

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Cross posted from Substack.

A few years ago Gulnara and I made a video on unemployment. Although this was a particularly unpopular video, it was actually one of our favourites – and we keep thinking about ways we want to expand the story of our friend JM.

In this video we give examples of how JM, a lawn mower man, could end up unemployed. A key example we gave was the creation of autonomous lawnmowers. We were then shocked when we walked into a store to see the following:

So what does the existence of automated lawnmowers tell us about JM, and how does it help us think about labour markets?

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Matt Nolan

Cost of job loss: Wage scarring

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Cross posted from Substack.

Previously we’ve talked about the cost of job loss in terms of revealed consumption responses – i.e. how do individuals cut their spending following job loss. This is a useful concept, and there is going to be more to say on this in the next year.

But a more basic point people may ask with respect to the cost of job loss – how much lower is someone’s lifetime income if they end up getting shoved out of their job!

Let’s chat about that while investigating some initial work my colleagues and I have undertaken at e61. For those who know things already, or don’t want to read, here is the picture you are after:

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Matt Nolan

How we talk about the nature of work

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Over two days Betsey Stevenson had two posts on the nature of work – both of which I agree with, and both of which sound like they may contradict.

So wait a second, if someone in a high status job gets paid more for the same effort and same contribution then why are we talking about marginal revenue product? Shouldn’t they already be rewarded by status? Is this a product of power? Let’s have a think

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Gulnara Nolan

How does wage stickiness contribute to the gender wage gap?

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Today I am going to discuss the relationship between the gender pay gap and wage stickiness.

Wages are termed sticky when they don’t adjust to the optimal level driven by the changes in labour market conditions. The interaction between sticky wages and economic shocks helps to generate the business cycle, and also causes a lot of the most costly elements of an economic downturn – unemployment and losses in skills. 

As I have discussed in a previous post, prices as well as wages can be sticky. However, the focus here is on the inability for wages to change from a predetermined path – specifically the downward rigidity of money wages.

A strong reason why wages can be very sticky is unionisation.  Unions and employers both use size to generate a bargaining position to negotiate wages.  As part of this strategic negotiation, unions (at least in the Anglo-Saxon sense) tend to promote relatively sticky wages – and demand persistent increases in wages even when the economic cycle turns south.

But what does this have to do with wage inequality?

Note:  There are multiple models of unionisation and social assistance – Matty pointed out that the books “Varieties of Capitalism” and Chapter 13 of the Oxford handbook of the welfare state are a useful read for thinking about this.  The response of unions in Germany during the GFC and COVID show that the relationship between unions and stickiness is complex – and the assumption they are related is based on the experience of Anglo-American economies in the 1960-1980s.

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Gulnara Nolan

Is it time to promote working from home?

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Over the past few weeks I’ve been working mostly from home as part of the COVID lockdown.  However, now with the move back to Level One I’m heading back into the office on a more full-time basis.  

In the first few days back, I have heard a lot of people from around the building talking about how they prefer different work arrangements – and I’ve heard a lot of people say that they felt more work was being done away from the office.  And yet, teams appear to be making the choice to move back to the office.  Why is this the case?

Although it may be the case that the teams stated and real preferences differ, I suspect there is something else at play – strategic complementarity.  Once we understand this concept it can become clear why we can end up in a worse equilibrium with regards to our work arrangements even when given flexi-choice, and why explicitly promoting working from home could be a “win-win”.

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Gulnara Nolan

What is the gig economy?

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As Motu has noted, the gig economy is an emerging part of the labour market with the features of independent contracting. In the gig economy world, there is little to no cost of switching the job to another is involved. Examples of the gig economy activities include: Uber drivers, YouTube bloggers/ social influencers, independent consultants and etc. 

So how can we think about the labour market in a world where work switches towards the gig economy?

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